Scott Sexton v. Ndex West, Llc

Citations: 713 F.3d 533; 2013 U.S. App. LEXIS 7396; 2013 WL 1490584Docket: 11-17432

Court: Court of Appeals for the Ninth Circuit; April 12, 2013; Federal Appellate Court

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The United States Court of Appeals for the Ninth Circuit affirmed the district court's summary judgment favoring NDEX West, LLC, OneWest Bank, FSB, and Stewart Title Guaranty Company, in a case involving wrongful foreclosure claims brought by Scott and Sonia Sexton. The Sextons contended that the district court should have remanded the case to state court based on the doctrines of prior exclusive jurisdiction and Colorado River abstention. The panel determined that neither doctrine applied; specifically, the prior exclusive jurisdiction doctrine was irrelevant as the state court did not retain jurisdiction over the property, and the Colorado River doctrine was inapplicable because there were no concurrent state proceedings concerning the Sextons' residence. 

The Sextons, who purchased a home in Reno, Nevada, in April 2007 with a loan of $752,000 from IndyMac Bank, faced foreclosure after falling behind on payments. Following a notice of breach from the trustee, mediation failed, leading the Sextons to file a lawsuit in state court alleging various claims related to the foreclosure, including wrongful foreclosure and violations of debt collection laws. They also filed a notice of lis pendens to stop the foreclosure, but the defendants subsequently removed the case to federal court on the grounds of diversity jurisdiction.

The Sextons acknowledged that the requirements for diversity jurisdiction were met but faced motions to dismiss their action for failure to state a claim. NDEX West and OneWest sought to expunge the Sextons’ lis pendens to facilitate foreclosure. The district court granted the defendants’ motions to dismiss, prompting a timely appeal from the Sextons. The appellate court has jurisdiction under 28 U.S.C. § 1291 and reviews federal subject-matter jurisdiction de novo, while factual findings are assessed for clear error.

On appeal, the Sextons argued for a sua sponte remand to state court based on two prudential doctrines: the prior exclusive jurisdiction doctrine and the Colorado River abstention doctrine. The prior exclusive jurisdiction doctrine asserts that when one court has jurisdiction over property, another court cannot assume jurisdiction over the same property, aiming to maintain comity between state and federal courts. The Sextons contended that their state court filing regarding foreclosure granted that court in rem jurisdiction over their home, thus prohibiting the district court from exercising jurisdiction over the same matter. They argued that this principle necessitated remand despite the defendants' successful removal. The Sextons' argument implies a broad application of this rule, potentially barring federal courts from exercising diversity jurisdiction in any in rem cases removed from state court.

The Sextons' argument regarding prior exclusive jurisdiction is rejected based on established case law. This doctrine applies only when a state court has previously exercised jurisdiction over property and retains that jurisdiction in a concurrent proceeding. In this case, the defendant's removal of the case from state court to federal court terminated the state court's jurisdiction, initiating federal jurisdiction instead, per 28 U.S.C. 1446(d). The Sextons' attempt to invoke the State Engineer case is misaligned, as it involved concurrent actions, unlike their situation. In State Engineer, the federal court's involvement was deemed inappropriate due to the state court's ongoing jurisdiction over a water-rights decree. 

Additionally, the Sextons' assertion that the Colorado River abstention doctrine applies is dismissed. This doctrine requires consideration of several factors related to concurrent state proceedings, particularly whether either court has exercised jurisdiction over the property. As the Sextons have not demonstrated concurrent state proceedings regarding their property, the Colorado River abstention doctrine is not applicable. Therefore, both the prior exclusive jurisdiction and Colorado River abstention claims are rejected, leading to the affirmation of the lower court's decision.